GBP/USD dipped to 17-month lows below 1.3000.

Towards the European close on Friday there were reports that the ECB is crafting a tool that would be deployed if there was a jump in peripheral yields. According to sources, the central bank has not yet decided whether the instrument should be deployed pre-emptively.

The Euro recovered following the report with a spike to the 1.0880 area, although with little evidence of sustained support given economic pressures.

Exit polls for the first round of the French Presidential election indicated that President Macron recorded around 28% of the vote and just over 23% for National Front leader Le Pen. There was an element of relief over the Macron performance as he exceeded expectations, but also concerns that

Final results for the first round indicated 27.6% for Macron and 23.4% for Le Pen with an intense campaign inevitable over the next two weeks.

The Euro spiked higher at Monday’s Asian open following the French result, but failed to hold the gains with EUR/USD retreating back below 1.0900 as the dollar posted net gains to a fresh 22-month high.

The Euro did maintain a slightly firmer tone on the major crosses with a notable advance against the yen.

The dollar has posted further net gains in global markets, primarily due to the moves in US yields.

Treasuries have been subjected to further heavy selling with the 10-year yield surging to 2.77% on Monday and a fresh 3-year high. Comments from Fed officials will continue to be watched closely in the short term.

The latest military intelligence from Ukraine continues to indicate that Russian forces are massing on the Eastern border of Ukraine with the intention to launch an aggressive attack on the Donbas region with the aim for forces to join Russian forces in Ukraine.

There will be further concerns over the risk of an extended conflict and also the risk of escalation given Western moves to supply additional weapons.

The latest Canadian labour-market report recorded an increase in employment of 72,500 for March after a 337,000 gain the previous month and slightly below consensus forecasts of 80,000.

There was, however, an increase of over 92,000 for full-time jobs.

The unemployment rate declined to 5.3% from 5.5% and in line with expectations.

Underlying concerns surrounding the Euro-zone outlook continued to limit Euro support. EUR/USD did find support below 1.0850 and secured a limited advance with the French election and ECB plans to cap peripheral yields providing an element of support. Overall yield spreads continued to support the dollar with a further increase in US yields on Monday. The dollar index traded just below 22-month highs. EUR/USD was unable to hold a correction above 1.0900.

USD/JPY posted a further sharp advance to re-test 6-year highs at the 125.00 level. USD/CHF secured a limited net advance to above 0.9350.

Sterling was unable to gain sustained support amid a lack of confidence in UK fundamentals. Latest UK data was also weaker than expected. GBP/USD dipped to 17-month lows below 1.3000 and again dipped below this level on Monday. GBP/EUR dipped towards 1.1950.

Commodity currencies lost further ground amid the firm dollar. AUD/USD retreated to below 0.7450 as reservations over the Chinese outlook also sapped confidence. USD/CAD retreated slightly after the solid Canadian jobs data, but edged just above 1.2600 on Monday.

Economic Calendar

Expected Previous
N/A GBP NIESR GDP Estimate (3M)(Mar) 1% 1%
16:00 Fed's Williams speech - -
22:00 NZD NZIER Business Confidence (QoQ)(Q1) - -

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